Correction: SKF Year-end report 2015

2016 February 02, 14:35
CET

Previous version did not
have complete report attached.

Gothenburg, 2 February
2016:

Alrik Danielson,
President and CEO:

“Customer demand developed in-line
with our expectations during the quarter, with the exception of
North America, which saw a sharper decline than anticipated
reflecting both lower demand and destocking in the supply chain.
Sales in local currency declined by 5%, driven mainly by lower
sales volumes within Industrial Market, which could not be
counteracted by increased volumes within Automotive
Market.

Faced with challenging market
conditions, we focused significant efforts on strengthening our
balance sheet and adjusting our organizational structure and ways
of working during the year.

With that in mind, I am pleased to
report continued strong levels of cash flow, declining net working
capital and reduced net debt.

The structural changes implemented
during the year have made us leaner and more focused on supporting
our core business: bearings and solutions that support rotating
shaft machinery efficiency. Our cost reduction programme has been
delivered on time, affecting 2 100 employees. In addition,
temporary and agency personnel were reduced by around 400.
Activity-based cost reductions continue across the Group, as do our
efforts to divest non-core businesses.

In order to reflect the market
conditions, competitive landscape and industrial activity levels we
foresee and the consequential reshaping of the company, the Group’s
financial targets have been adjusted. The new targets are to
achieve, over a business cycle, an organic sales growth of five
percent in local currencies and a reported operating margin of 12
percent, according to IFRS. On the capital side, we have increased
our ambition to manage our working capital in an efficient manner
and the new target is to reach a net working capital of 25 percent
of sales. The target for return on capital employed (ROCE) has been
adjusted to 16 percent, as a consequence of the operating margin
target. Our target of achieving a net debt/equity ratio of 80
percent remains unchanged. Although we have more hard work ahead of
us, I believe these targets can be achieved.

Entering the first quarter of 2016,
we expect macro-economic uncertainty to continue. As a result, we
expect demand to be relatively unchanged sequentially but slightly
lower year-on-year.

The markets we operate in remain
challenging, but I am convinced that we will benefit from the
structural changes we have implemented and our increased focus on
customer applications.”

Key figures, SEKm

Q4
2015

Q4
2014

2015

2014

Net sales

18 215

18 499

75 997

70 975

Operating profit excl. one-time
items

1 726

2 078

8 655

8 291

Operating margin excl. one-time
items, %

9.5

11.2

11.4

11.7

One-time items in operating
profit

-687

-470

-1 687

-490

Operating profit

1 039

1 608

6 968

7 801

Operating margin, %

5.7

8.7

9.2

11.0

Profit before taxes, excl.
operating and financial one-time items

1 626

1 763

7 857

7 258

Profit before taxes

653

1 293

5 834

6 668

Net cash flow after investments
before financing

1 966

2 126

6 416

2 137

Net sales
change y-o-y, %:

Organic

Structure

Currency

Total

Q4 2015

-5.2

-1.0

4.7

-1.5

Full Year

-2.6

-0.5

10.2

7.1

Organic sales
change in local currencies, per region y-o-y,
%:

Europe

North
America

Latin
America

Asia

Middle East &
Africa

Q4 2015

0.3

-12.7

-0.5

-8.7

10.8

Full Year

0.4

-8.1

0.5

-4.2

13.2

Dividend Proposal
The Board has decided to propose an unchanged dividend of SEK 5.50
per share to the Annual General Meeting.

Outlook for the first
quarter 2016

Demand compared to the first
quarter 2015
The demand for SKF’s products and services is expected to be
slightly lower for the Group. Demand for the Automotive Market and
Specialty Business is expected to be relatively unchanged, while
demand for the Industrial Market is expected to be lower. Demand is
expected to be relatively unchanged in Europe, slightly lower in
Asia and Latin America and significantly lower in North
America.

Demand compared to the
fourth quarter 2015
The demand for SKF’s products and services is expected to be
relatively unchanged for the Group. Demand for the Automotive
Market is expected to be higher, demand for Specialty Business to
be slightly higher and demand for Industrial Market is expected to
be relatively unchanged. Demand is expected to be higher in Europe,
slightly lower in North America and lower in Latin America and
Asia.

You will find all
information regarding the SKF Year-end report 2015 on the IR
website.

Aktiebolaget SKF
(publ)

AB SKF is required to disclose
the information provided herein pursuant to the Securities Markets
Act and/or the Financial Instruments Trading Act. The information
was submitted for publication at 13:00 on 2 February 2016.

SKF is a leading global supplier of
bearings, seals, mechatronics, lubrication systems, and services
which include technical support, maintenance and reliability
services, engineering consulting and training. SKF is represented
in more than 130 countries and has around 15,000 distributor
locations worldwide. Annual sales in 2015 were SEK 70 975 million
and the number of employees was 48 593. www.skf.com